As Borders Remain Closed, Taiwan’s Tourism Sector Suffers

The domestic market is too small to sustain the industry indefinitely, especially in Taipei.

The unmistakable sound of birds chirping fills the elevator of the Regent Taipei. The avian audio is part of the hotel’s COVID-induced transformation into an urban resort. Unusual, perhaps, but these are not ordinary times for the tourism sector, and besides, it beats the usual Muzak elevator soundtrack.

The Regent’s owner, the Silks Hotel Group, operates properties throughout Taiwan but is best known for the centrally located Taipei hotel. Pre-pandemic, the Regent was one of the most successful five-star hotels in Taipei, and it still is a top performer with room occupancy almost double the average in Taipei. That is a relative figure, though.

Taipei hotels are struggling despite Taiwan having virtually no local COVID transmissions in recent months. As of September, hotels in the Taiwanese capital had an average room occupancy of just 22%, about the same as last year and down from 75% in 2019, according to Tourism Bureau data. While the current level is certainly an improvement over the 9% nadir experienced in July, before Taiwan had corralled a summer outbreak, it is not sustainable.

“Taipei is not a leading destination for domestic travelers; it absolutely needs the international market,” says Ping Lee, head of Taiwan research for property consultancy CBRE. She reckons that the maximum average occupancy rate Taipei hotels can reach with the border closed is 30%, adding that the capital’s hotel market is the only one in Taiwan that registered negative revenue per available room (RevPAR) growth in the first half of the year.

Steven Pan, chairman of the Silks Hotel Group, is not optimistic that Taiwan’s borders will reopen soon. “Unfortunately, we’re tracking the China model,” he says. “We’re so spoiled [by the lack of community transmission] and used to ‘zero COVID’ that at the first sign of cases, people panic.”

Pan points out that Taiwan’s export-dependent economy is booming, buoyed by persistent global demand for its electronics products. The Taiwan Institute of Economic Research (TIER) estimates that the economy will grow by 6.1% this year, the highest rate since 2010.

Taiwan’s success containing the coronavirus has become a double-edged sword, though. “The government is thinking, ‘why should I take a risk with reopening when things are going so well?’” Pan says.

Some hotels – mostly in northern Taiwan – have tried to adapt to the lack of international visitors by becoming quarantine hotels. In Silks’ case, the transformation includes its Just Sleep hotel on Linsen North Road. Before the pandemic, Just Sleep and many others like it in Taipei catered to international business travelers. Now such properties can generate badly needed revenue in the short to medium term by serving citizens and residents returning from overseas.

Photo: Matthew Fulco

“More and more properties are converting to quarantine hotels, especially in Taipei,” says CK Cheng, founder and CEO of travel-booking platform AsiaYo. “They really had been hopeful that the border would open up, but they have given up for now.” 

Since late June, the Central Epidemic Command Center (CECC) has required all arrivals to quarantine in either a hotel or centralized facility for 14 days. The policy will be relaxed from mid-December to mid-February for the Lunar New Year, allowing fully vaccinated arrivals to quarantine at home for the second half of that 14-day period, but hotels still can count on guests staying for at least seven days.

One reason for the relaxation was that demand for rooms in quarantine hotels far exceeded supply. Many Taiwanese businesspeople based in China and Vietnam have not been home for two years and do not want to spend yet another Lunar New Year overseas. Their lobbying efforts appear to have paid off.

The government estimates that shortening the mandatory hotel quarantine to seven days will free up about 6,000 more rooms, bringing the total to about 35,000. About 13,000 of those rooms will be in Taipei, divided among 142 “epidemic prevention” hotels.

As an interim revenue generator, serving as a quarantine hotel can be lucrative for some properties. Costs are much lower because fewer staff members are needed; indeed, no service is involved besides delivering meals to a guest’s door.

Still, even if the business can be profitable, it is no substitute for an authentic hotel experience, says Elaine Chang, general manager of the Palais de Chine Hotel in Taipei. “From a pure profitability standpoint, I would love to have a guest stay with us for 14 days and dine in for all three meals,” she says. “But [with quarantine hotels] there is no service, no quality. The most beautiful part of what we do in the industry is lost.”

Bubbling up

For the tourism industry, one of the most vexing aspects of Taiwan’s COVID policy is the lack of a clear reopening roadmap. The CECC has mooted various milestones for easing restrictions, such as a two-dose vaccination rate of 60% of the eligible Taiwan population – which will likely be reached by mid-December. But it has yet to publicly commit to anything. Some observers attribute the cautious approach to political considerations, as Taiwan will hold local elections in December 2022.

However, politics alone does not explain the vagueness regarding a reopening schedule. The government is following public opinion, which to date shows little appetite for reopening, says AsiaYo’s Cheng. He notes that the closed border directly affects only a fraction of the population. “Most Taiwanese do not need to travel internationally or work in industries reliant on visitors from overseas. So many people believe that Taiwan should do what is best for the larger group, not just that minority.”

That is where Taiwan’s “zero-COVID” mindset factors heavily. The CECC’s messaging in portraying the pandemic to the public has not changed since early 2020. A press conference during which each new case is announced is held daily. Eliminating community transmission remains the unspoken goal. Despite the two-dose vaccination rate reaching 55% by late November (with 77% of the population having received one dose), a visceral fear of COVID-19 still permeates Taiwan’s society. With every case still treated like a grave threat to public health, the disease carries a stigma.

“This is where Taiwan struggles – accepting that COVID-19 is going to become endemic,” says Chen Ming-ming, founder and CEO of travel-booking platform KKday. “Once the vaccination rate gets to a certain level, then what? Taiwan is not yet having that conversation.”

To be sure, Taiwan’s fellow Asian tigers Singapore and South Korea both launched phased reopening plans after hitting respective vaccination targets of 70% and 80%, and both countries saw a record uptick in cases and hospitalizations. Singapore was averaging about 1,400 cases a day as of late November, while South Korea was recording around 3,700 cases a day. Singapore’s intensive-care utilization rate reached 84% on October 25, according to The New York Times. Since then it has fallen to about 50%.

Whether Taiwan can reopen with better results is an open question. The infectiousness of the dominant Delta variant of SARS-CoV-2 has made containing an outbreak a herculean task, and there are worries that the Omicron variant will now further complicate the situation. The outbreak that Taiwan halted earlier this year was driven by the less infectious Alpha variant.

Under this scenario, the most likely international travel opportunities will be tightly controlled bubbles, such as the one Taiwan opened with the Pacific Island country of Palau. That arrangement began in April, was suspended during the outbreak, and restarted in August. Given that Palau has vaccinated 99% of its population of 18,000 and has only recorded two cases of COVID-19 during the pandemic, the risk of infection with SARS-CoV-2 from traveling there is low.

When it restarted in August, the bubble initially attracted considerable interest from Taiwanese. Since Taiwan lacked vaccines at the time, local travel agencies sold packages that included a dose of the Pfizer-BioNTech, Moderna, or Johnson & Johnson shots after arrival in Palau. Yet as Taiwan’s vaccine supply stabilized, demand tapered off, says KKday’s Chen. Tourism Bureau data shows that 697 people traveled to Palau in August and 965 in September, but just 385 in October.

Labyrinthine rules and restrictions governing the bubble are also a factor. While no quarantine is required upon return to Taiwan from Palau, those travelers still need to undergo five days of “enhanced self-health management,” which in theory can be done at home. A cursory look at the requirements, however, could easily discourage those considering the trip. The rules ban sharing meals with family members who did not visit Palau, require the use of separate washrooms to bathe, and instruct the returned travelers to avoid public spaces where they might encounter people they do not regularly come into contact with.

“There are a lot of requirements and they are not all easy to understand,” says KKday’s Chen. He notes that many Taiwanese are unsure about how traveling to Palau will affect their work situation. “When some companies hear that someone has been abroad, they immediately are concerned about COVID-19 and may want those who have been abroad to stay away from the office.” 

This writer tried to book a flight to Palau in late November, but all flights for the month were canceled due to insufficient demand. The wave of cancellations prompted a public rebuke of China Airlines (CAL) by Palauan president Surangel Whipps, Jr. According to Palau’s Island Times, he said: “What they are doing is poisoning Palau’s market and it is irresponsible. For example, a person books a ticket to come to Palau as a tourist, and what happens, they [CAL] cancel the flight. The flights are no longer reliable.”

Whipps’ complaint appears to have gotten the attention of Taiwan’s government. On November 23 during a meeting of the Legislative Yuan’s Transportation Committee, the Ministry of Transportation and Communications (MOTC) pledged to cooperate with the Ministry of Foreign Affairs and CAL to resolve the issue.

“We hope to find a solution that will not disrupt the airline’s operations, while stabilizing the tourism market between the two countries,” MOTC said. On November 22, CAL announced that it would resume regular service to Palau with six round-trip flights in the month of December.

An easy way to make traveling to Palau more appealing would be to pare down the restrictions when travelers return to Taiwan, especially as nearly all returnees are fully vaccinated at this point. That may sound like a tall order, but given Palau’s political significance to Taiwan as one of just 15 countries with which it maintains full diplomatic relations, there is impetus to restart regular tourism between the two countries.

If the Palau bubble is ultimately deemed a success, it could pave the way for similar arrangements with larger countries, such as Japan, which was the top overseas destination for Taiwanese tourists in 2019. “I can see a bubble happening” between Taiwan and Japan, says Silks Hotels’ Pan.

Meanwhile, CBRE’s Lee suggests that Taiwan first open its border to business travelers. “This will help the big hotels in Taipei that have really been struggling,” she says.

Pan agrees. “These are the essential travelers, the people willing to do the long quarantine if that is what is necessary,” he says. “Taiwan should start issuing visas to these travelers again.” He adds: “The hospitality industry will never recover until border controls and quarantine are lifted.”

One comment

  1. Great article Matt, gathers all the viewpoints and gives me an encompassing understanding of the situation in Taiwan.

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